What can I afford?
House hunting begins at home... with planning. Before you grab the road maps and hit the streets with your favourite Royal LePage REALTOR®, you need to know what you can afford to buy. Knowing your affordable price range will bring your house hunting into focus.
The amount you can afford depends on a number of factors. Most importantly, consider your gross household income, your down payment amount, and the mortgage interest rate.
Two rules of thumb to determine the mortgage you can afford:
Monthly Payments
- First, determine your gross annual household income.
- Multiply by 32% to calculate your gross debt service ratio, which is the typical portion of your income that goes toward total household expenses.
- The amount gives you the full amount you can afford between a mortgage payment, taxes, and mortgage life insurance.
Purchase price
- The total amount of purchase price you can comfortably afford is approximately three times your household income. Of course, this general rule of thumb does not consider your down payment, assets and liabilities, or personal net worth. However, it is a good indicator of your general price range.
